Crowdfunding is an increasingly popular way of financing projects and business ideas through small contributions from a large number of individuals. Crowdfunding is a way of raising funds via specialist online platforms in a climate where raising funds for projects and business ideas through business angels or traditional lending from banks is hard.

The UK is the most advanced country in the world for equity crowdfunding-with almost 40 equity and revenue type platforms.

Start-up and early stage businesses looking to raise capital do so by selling shares to investors through an online platform. Businesses create a pitch and list the amount they're looking to raise and the equity stake that's available in the business. This is usually accompanied by a video profile of the entrepreneur. An online Q&A helps potential investors to ask questions of the business owner before deciding whether to invest.

Investing in early stage companies is fraught with risk, with many destined to fail and platforms are at pains to make this abundantly clear to potential investors, who must self-certify that they are sophisticated investors by completing a questionnaire. Returns can be much higher than the other markets and for those people passionate about business and being part of a success, this is a fascinating place to get started in angel investment with lower initial outlay than traditional angel investing. It also allows investors to spread risk quickly across a number of new businesses.

The potential for use with or instead of traditional lending is huge and is a real new alternative to banks and venture capitalists as their traditional role as gatekeepers to finance is undermined.

This independent report: UK equity and revenue crowd-funding 2013 from a writer/ researcher/ economist specializing in reporting on new financial ideas, explains it in ways any intelligent non-specialist can understand.